A simultaneous-equation model for predicting the production frontier of a forest holding

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Abstract
Strategic forest planning is the term used of the process involving determining the production possibilities of a forest area. Stand-level simulation is often used to produce a forest-holding-level production function, e.g., a linear programming model. However, stand-level data are not always available, and the planning process has to be carried out using forest-holding-level data. The system of simultaneous equations developed in this study can be used to predict the production frontier of a forest holding. The said simultaneous equations were constructed using simulated data of the points of the production frontiers of a total of 1367 nonindustrial, private forest holdings. Auxiliary models are used to produce data on the allowable cut over two management periods (short- and long-term horizons) to help the decision maker in adjusting the cutting objectives to lie within a feasible range. The simultaneous equations constructed compute the production frontier of a forest holding for given sets of exogenous variables. The endogenous variables involved include volume of standing timber after two management periods and annual regeneration area during the management periods. The predicted values of the forest-holding-level variables produced by the model can be interpreted in economic terms and used as input data when dealing with other issues considered in strategic analysis.

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